Friday 29 March 2024
 
»
 
»
SAUDI, QATAR MARKETS BITE

Drake & Scull revenue doubles to $237m, trims net loss in Q3

DUBAI, November 14, 2016

Drake & Scull International (DSI), a regional engineering and services leader based in Dubai, UAE, said its revenue for the third quarter has grown two-fold to Dh869 million ($237 million) from Dh434 million ($118) for the same period last year.

Announcing the results for the quarter ended September 30, 2016, the Emirati contractor said it has trimmed it net loss for the period to Dh81 million from the previous year's net loss of Dh985 million.

The third quarter 2016 losses reflects the prolonged weakness of the construction sector in key markets such as Saudi Arabia, Qatar, and – to a lesser extent – the broader GCC and Middle East regions, said a statement from the company.

It also highlights the operational delays of certain ongoing projects and a slower backlog execution in Saudi Arabia and the Levant region resulting in cost overruns particularly in the civil sector, it added.

For the first nine months, DSI reported revenues of Dh2.7 billion compared to Dh2.8 billion, while the net loss for the period fell to Dh297 million from the previous year's net loss of Dh951 million.

The Dubai contractor continues to cut costs aggressively with third-quarter core SG&A (selling, general and adminstrative expenses), before accounting for provisions, reduced by Dh11 million, a decline of 16 per cent year-on- year.

In the first nine months of 2016, the SG&A was reduced by a total of Dh43 million, a decline of 19 per cent year-on-year.

Commenting on the performance, CEO Wael Allan said: "During the past six months we have embarked on a thorough and detailed review to identify risks and opportunities. We have concluded a series of new management appointments which are critical to the continuity of the business and we have established a performance driven and strong culture with emphasis on cost reduction while maintaining client focus and performance excellence."

"Concurrently, we have introduced additional corporate governance and compliance policies to foster a culture of ownership, accountability and operational rigour," stated Allan.

According to him, the DSI maintained its revenues for the two consecutive quarters and continues to cut down its expenditure through a relentless cost-cutting programme.

"Our order backlog is slowly moving towards a higher-value, higher-margin portfolio of projects with a focused geographical diversification, predominately in the UAE. Our disciplined approach over the past six months is shaping a leaner, more adaptable company," he noted.

“However, despite achieving progress in our home market the UAE, the prolonged market headwinds and economic uncertainties, especially in what previously was one of our core markets (Saudi Arabia), has made us realise that it is time to be bold and engage in a real transformation," observed Allan.

Selectivity in project awards is a strategic focus for the long-term growth of the company as the management adopts a more robust and prudent approach to business development and new order wins with emphasis on the UAE market and the core engineering business.

The third quarter order backlog plunged 28 per cent as compared to the same period last year and stood at Dh8.8 billion as of September 30, 2016. This sharp decline was mainly due to two project cancellations in Saudi Arabia adjusted in the second quarter.

During this period, the management appointed a financial advisor to assist the company on a number of business transformation and strategic initiatives.

"The appointment of the financial advisor to assist the company on a number of business transformation and strategic initiatives; to address the current market challenges the group is facing in its key markets is a timely move in preparation for a stronger future for Drake & Scull," remarked Kailash Sadangi, the chief financial officer.

The adjustments mitigated the operational and financial risks arising from civil works projects in Saudi Arabia. It has also allowed the company to reduce its exposure to volatile and low performing segments in the country, he stated.

In the third quarter, DSI said it had booked Dh246 million worth of new project awards, which included contracts in India and Palestine in the waste water sector.

Over the nine months period, the company has added Dh815 million of projects across Qatar, Iraq, Palestine and India in the rail, oil and gas and waste water sectors. This underscores the strategic focus on high margin business targeted to improve operating margins in the long term, it stated.

Allan said the group has started its financial review to assess the working capital and funding requirements with respect to its individual business units and the company as a whole.

"The outcome will necessitate difficult executive decisions. These may include divestments in non-core geographies, retrenching on civil works mainly in Saudi Arabia as well as taking a more conservative stance on the recoverability of certain receivables across the business," he noted.
 
Dubbing this initiative a a stepping-stone towards the full transformation of DSI, Allan said the company will emerge to start the 2017 financial year with a healthier balance sheet and better prospects to tender for new projects with clear strategy to return to profitability.-TradeArabia News Service




Tags: Qatar | Saudi | Drake & Scull | Revenue | loss |

More Construction & Real Estate Stories

calendarCalendar of Events

Ads